2003 PLP 2395 (PTD)

13. The advocate also argued that there were no orders of the Seed Certification Department forbidding the, sale of imported coconut seeds in the market at Karachi, Lahore or anywhere else in Pakistan: There were no orders of the Customs Department or the C.B.R. prescribing any conditions on import and sale. There were no restrictions either in the Sales Tax Act or imposed by the (Provincial) Agricultural Department. The complainants imported the coconut seeds and paid duty according to the customs tariff availing exemption from sales tax under serial 4 of the Sixth Schedule to the Sales Tax Act. The complainants have never acted against the provisions of law nor evaded customs duty and sales tax. It was not true that coconut could be grown only within 100 miles of (the coastal area of) Karachi. According to the latest research and reports, confirmed by the Council General of Sri Lanka based in Pakistan, the coconut plantation could be established even in the mountain area and riverbeds.

14. He stated that it was not possible to determine how much amount was received on the sale of Coconut Seeds and determination of tax liability on mere presumption was in any case not justified. The amount of sales-tax recoverable as indicated in paragraph 4 of the show-cause notice was based on presumption. The total amounts received by the complainants included transportation charges, loading and unloading charges, and several other expenses and dues. The department has merely 'taken the figures of the bank account as the value of supplies made by the complainants. It was wrong to report that the complainants were not maintaining the sales tax record. The factual position was that the audit party did not pay any visit to their office: When they conducted the raid, they met Mr. Kaukab Iqbal; the proprietor of Messrs ASKI International. He was engaged in the customs clearing and forwarding work and obviously did not maintain sales tax record.

15. The advocate invited attention to the list of 35 importers of coconut seeds obtained from the Computer Bureau of the Appraisement Collectorate and stated that none of these importers had either paid the sales tax or has been called upon by the authorities to pay the tax. The complainant's firm had been singled out for this illegal action and harassment by the sales tax officials. He requested that the order passed by the adjudication officer/the Deputy Collector of Sales Tax be set aside and strict administrative action be taken against the sales tax officials for demanding illegal money and harassing the complainants.

16. The Deputy Collector reiterated the, arguments advanced in the reply of the complaint and the comments and added that the show-cause notice was duly issued to the complainants, full opportunity was provided to them to explain their position and as many as 14 hearings were conducted because several officers were transferred one after another. He stated that the provision of decision within 4, 5 days, or extended period of 90 days, under subsection (3) of section 36 of the Sales Tax Act was recommendatory in nature as per ruling given by the Lahore High Court and not mandatory. On inquiry, the Deputy Collector replied that under the Sixth Schedule of the Sales Tax Act, there was no bar or conditionality on the sale of imported coconut seeds. However, he stated, the correspondence with the Federal Seeds Certification Department disclosed that the sale of coconut seeds was not allowed.

17. The Deputy Collector was asked to furnish answers/comments on some questions and issues raising out of the proceedings of the complaint. His answers are reproduced below:-- (i) Q. Whether Collector's prior approval under section 32(3) of the Sales Tax Act. had been taken for raiding the office of the complainants? Ans. The Collector of sales-tax had authorised the Additional Collector and the Assistant Collector to proceed in the case. Q. Whether the Collector had authorized the team members under section 38 of the Act to conduct raid? Ans: Section 32 of the Sales Tax Act empowers the C delegate the powers to any officer of the Sales Tax Department by notification in the official Gazette; subsection that the Officer to whom any power is delegated to delegate it further. (ii) Q. What are the restrictions on the sale of the coconut seeds in the local market and the evidence the Department has that coconut seeds were sold to unauthorized persons? Ans: The private diaries resumed at tile time of visit revealed that the complainants had sold the goods to the persons other than the growers (belonging to the) outstation (destination). (iii) Q. Out of 35 importers identified in the PRAL printout, what was the number of importers who had paid sales tax on coconut seeds or against whom cases were made out? Ans. No reply. (iv) Q. The proviso under subsection (3) of section 36 lays down that the order for recovery of tax under-levied or short levied should be made within 45 days issue of show-cause notice or extended period of 90 days. What was the justification for ignoring this time-limit? Ans. On page No.9 of the note-sheet of file No.16(35)ST/W/TECH?2000 there is a note that extension has been granted by the C.B.R. up to 30-9-2002. Additionally, in a decision by the Appellate Tribunal in Appeal No.2041/LB/2001, it has been held that the time limit for adjudication after issue of show7cause notice is directory and not mandatory. (v) Q. coconut seeds imported for sowing were exempt under the Sixth Schedule of the Sales Tax Act. Under what law was the case made out against the complainant? Ans. No Answer.

18. The submissions made by the complainants and their counsel and the arguments put forward by the respondent have been discussed in the foregoing paragraph at considerable length. This is a unique case in that the Collector of Sales Tax arrogated unto himself the functions of the policy maker, the regulator and the enforcement agent end took the view that since in his opinion, and according to his information, the complainants were selling/dispatching the goods to the wrong parties, they were liable to sales taxe and not entitled to the exemption prescribed in the Sixth Schedule. The C.B.R. or the Federal Government had not prescribed any rules nor issued any instructions for the importers and the department or given any directive about exercising control on the sale of coconut seeds genuinely and lawfully imported and cleared by the Customs Authorities.

19. Thus armed with the Collector's illegal directive, the Sales Tax Department, in its zeal to verify the sales of imported coconut seeds, swung into action, without the legal authority to undertake post importation verification. The raid of the office premises, its search, seizure of the documents, and institution of case for tax evasion and contravention of various provisions of Sales Tax Act were undertaker, without lawful basis. The Deputy Collector (Adjudication) issued the show-cause notice and decided the case against the complainants ordering recovery of sales tax, additional tax and penalty on the basis of the allegations that the importers were selling coconut seeds imported for sowing purposes. The Adjudicating Officer placed reliance solely on the letters of the Seed Inspector to the President, Coconut Plantation Society, expressing concern on the import of coconut seeds, and calling for detailed information from the said Society for monitoring the Coconut Seeds imports and their utilization. When the complainants wanted to file an appeal before the Collector (Appeals), he refused to receive it without prior payment of dues and also forbade his Personal Assistant from receiving the appeal document:

20. The legal position is absolutely clear that under Item 4 under Serial No.4 of the Sixth Schedule of the Sales Tax Act, 'Seeds, fruits A and spores for sowing'; under heading 12-09, are exempt from sales tax. The Customs Authorities had released the imported consignments lawfully allowing sales tax exemption after completing the formalities. The respondent has not produced .any orders, instructions, rules and regulations with regard to the restrictions/conditions about the sale of coconut seeds The Government has not prescribed any regulatory mechanism is this regard. The Collector and his subordinate officials acted beyond jurisdiction and without authority.

21. The Deputy Collector (Adjudication) merely reproduced the written reply of the complainants and the para-wise comments of the Departmental representative in the adjudication order, dated 21-9-2002. She has drawn conclusion from some correspondence of Federal Seed Certification Department and the Seed Inspector and refused to entertain the pleas of the complainants and ordered the recovery of sales tax and additional tax mentioned in .the contravention report in addition to penalty. The respondent has contended that the hearing was conducted 14 times but the complainants did not mention about the demand of bribery. Firstly 14 dates of hearing represent adjournments. 14 times and hardly as many opportunities for defence; they not merely show the quick turnover of the officers but also betray how non-seriously the adjudication work is taken: Secondly, the adjudication order itself gives a clear impression that the officer did not apply her mind and meekly, almost summarily, she pronounced judgment in accordance with the charges framed in the contravention report. The pendency of the case for over two years cannot be justified under any circumstances. It has not been denied by the department that the Collector (Appeals) refused to receive the appeal against the order of the Deputy Collector.

22. From the foregoing facts it is established that action taken by the department i.e. the Collector and his subordinate officials, the adjudication order passed by the Deputy Collector, and the refusal of the Collectors (Appeals) not to allow the complainants to even file an appeal, were all contrary to law, perverse, arbitrary and unreasonable, unjust, I oppressive, and a regrettable example of administrative and judicial excess in misuse of powers, which constitute maladministration under section 2 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.

23. The other issue involved is in respect of allegations of corruption, rude behaviour and harassment by staff members particularly Najeebullah Jafferi and Tehseen Saleem. On this issue evidence was recorded. The complainant, Iqbal Ahmad Qazi, his son Kaukab Iqbal and Mumtaz Ali Shaikh and Syed Tanvir Hussain were examined who supported the complainant, while the statement of Tahseen Saleem and Najeebullah Jafferi was also recorded. All these witnesses were cross-examined.

24. A perusal of the statements recorded makes it clear that the staff members particularly, Tehseen Saleem and Najeebullah Jafferi have behaved rudely in the office of the complainant. They had taken away all the files including the files of complainant's son and his clients who is carrying on his business of clearing agency in the same premises where his father (complainant) has his office. However, illegality was identified that no proper receipt enumerating each and every file or document seized was given to the complainant at the time of inspection of record or seizing them. A receipt only stating the number of files was issued. This is not a correct procedure. It was necessary to make inventory of all files, documents or articles and provide a receipt to the complainant duly signed by the authorised officer immediately at the time of seizure and removal from the premises.

25. Besides this from the evidence of P.W.1 it seems clear that Najeebullah Jafferi had demanded bribe from the complainant. Witnesses were examined on behalf of the complainant to corroborate the statement of Kaukab Iqbal who had produced tape-recorded talks between him and Najeebullah Jafferi. Although during cross-examination Najeebullah Jafferi challenged veracity of the tape-recorded statement, it seems from his statement as well that he admits that the tape-recorded talk contained his voice and that he had talked with Kaukab Iqbal. Further more the talk between Kaukab Iqbal and Najeebullah Jafferi at the latter's residence in the night is supported by two witnesses. Although the veracity of their statement had been challenged yet while considering such cases one should keep in mind facts and circumstances where traders hardly make false allegations of corruption and bribe out of fear and revenge action. It is therefore, necessary that full enquiry should be made and disciplinary action may be taken against Najeebullah Jafferi. As regards Tehseen Saleem except his rude behaviour allegation of demanding bribe is not established. He has clarified his position and filed documents to show that prima facia his assets were legally acquired.

26. Considering all facts and circumstances of the case it is recommended that C.B.R. (i) Set aside the order passed by the Deputy Collector and quash the entire proceedings against the complainants within thirty days; (ii) An enquiry be instituted and disciplinary action be taken against Najeebullah Jafferi and report be submitted within sixty days. (iii) Letter be issued to Tehseen Saleem not to behave rudely with tax payers. (iv) Instructions be issued that while seizing the records/documents/ articles of any unit complete inventory should be prepared on the spot and delivered to the unit duly signed by the authorized officer before- the removal from the premises. (v) Compliance with regard to (i) and (ii) as indicated therein and with regard to (iii) and (iv) within thirty days. C.M.A./828/FTO Order accordingly